Penzel Constr. Co. v. Jackson R-2 Sch. Dist.

• Decision Date: 20 July 2021
• Docket Number: No. ED 108821,ED 108821
• Parties: PENZEL CONSTRUCTION COMPANY, INC., Respondent, v. JACKSON R-2 SCHOOL DISTRICT, Appellant.
• Court: Missouri Court of Appeals

635 S.W.3d 109

PENZEL CONSTRUCTION COMPANY, INC., Respondent,

v.JACKSON R-2 SCHOOL DISTRICT, Appellant.

No. ED 108821

Missouri Court of Appeals, Eastern District, DIVISION THREE.

FILED: July 20, 2021

Motion for Rehearing and/or Transfer to Supreme Court Denied August 23, 2021

Application for Transfer Denied December 21, 2021

For Appellant: Jay S. Dobbs, Boris A. Kaupp, 825 Maryville Centre Dr., Ste. 300, Town & Country, MO 63017, Nicholas P. Meriage, Robyn G. Fox, Gary E. Snodgrass, 100 S. Fourth St., Ste. 400, St. Louis, MO 63102.

For Respondent: Michael E. Wilson, 10 S. Broadway, Ste. 2000, St. Louis, MO 63102.

KURT S. ODENWALD, Judge

Introduction

The parties to this appeal appear for a second time before this Court in a contract dispute involving substantial delays and cost overruns in connection with a construction project for the renovation and addition to the Jackson High School campus. The Jackson R-2 School District (the "District") appeals from the judgment of the trial court following a jury trial finding for Penzel Construction Company, Inc. ("Penzel") on its claim for breach of contract as well as prompt-payment prejudgment interest ("PPP interest") under Section 34.057.¹ The District raises nine points on appeal, which we review in an order most naturally addressing the issues raised within.

Four of the District's points on appeal, Points Five, Seven, Eight, and Nine, concern jury instructions. Point Five challenges the PPP interest verdict-directing Instruction No. 16, claiming the submitted instruction was not supported by the evidence and misstated the law by allowing Penzel to prove it had submitted a "demand" for payment rather than an "invoice." In Point Seven, the District maintains the trial court erred in giving Instruction No. 14 because it did not accurately instruct the jury on the law regarding the modified total cost method (the "MTCM") of calculating damages. In Point Eight, the District asserts the breach-of-contract verdict-directing Instruction No. 8 erroneously allowed the jury to find for Penzel on bases other than those set forth by this Court in prior proceedings in this case. In Point Nine, the District posits the pleadings and evidence did not support giving Instruction No. 12 regarding Penzel's avoidance to the District's affirmative defense of failure to give timely notice and in correspondingly modifying Instruction No. 11.

Two points argue Penzel failed to make a submissible case and challenge the trial court's denial of a judgment notwithstanding the verdict ("JNOV") and directed verdict, respectively. In Point Four, the District maintains that the trial court erred in denying its motion for JNOV because Penzel failed to make a submissible case under Section 34.057 for PPP interest. In Point Six, the District argues the trial court erred in denying its motion for a directed verdict because Penzel did not make a submissible case for damages under the MTCM.

Only one point challenges an evidentiary ruling of the trial court. In Point Three, the District contends the trial court abused its discretion in excluding the proffered testimony of an expert witness concerning an unreasonably low subcontractor bid because the testimony was directly probative on Penzel's damages and excluding the evidence prejudiced the District.

The final two points contend the prejudgment interest awarded by the trial court was improper. In Point One, the District alleges Penzel did not satisfy the contract requirements allowing the award of prejudgment interest. In Point Two, the District argues the trial court erred in awarding general prejudgment interest in the amount specified by Section 408.020 because the trial court could not as a matter of law award both general prejudgment interest under Section 408.020 and PPP interest under Section 34.057.

We affirm the judgment of the trial court on all points. Specifically, because Instruction No. 16 governing Penzel's claimed PPP interest was supported by the evidence and the contested portions of Instruction No. 16 either did not misstate the law or did not materially prejudice the District, we deny Point Five. Because Instruction No. 14 did not incorrectly instruct the jury in any of the ways alleged, we deny Point Seven. Because the grounds for recovery in Instruction No. 8 were supported by Penzel's pleadings and evidence on its theories of recovery for breach of contract, the District's limited challenge to only one of Penzel's two theories of recovery fails to support a claim of reversible error, and we deny Point Eight. Because Instructions No. 11 and 12 concerning the District's affirmative defense and Penzel's avoidance did not prejudice the District in light of its own insufficient pleadings, we deny Point Nine.

Penzel made a submissible case for PPP interest under Section 34.057, therefore we deny Point Four. Penzel also made a submissible case for damages under the MTCM, therefore we deny Point Six.

The exclusion of the proffered expert witness testimony as to the reasonableness of the subcontractor's bid did not prejudice the District, thus we deny Point Three.

Finally, because the contract expressly provided for prejudgment interest and Penzel satisfied its conditions, the trial court did not err in awarding prejudgment interest under the contract, and we deny Point One. Because the District does not challenge whether prejudgment interest can be concurrently imposed under a contract and under Section 34.057, we deny Point Two.

Accordingly, we affirm the judgment of the trial court on all points. Additionally, we grant Penzel's motion for appellate attorneys’ fees and remand to the trial court for a determination of reasonable attorneys’ fees.

Factual and Procedural History

We previously considered this case on appeal in Penzel Constr. Co., Inc. v. Jackson R-2 Sch. Dist., 544 S.W.3d 214 (Mo. App. E.D. 2017) [hereinafter Penzel I ]. We generally incorporate the facts as set forth in Penzel I but repeat some facts here in the interest of clarity. We will revisit further details from our analysis in Penzel I, as well as other facts of this case not otherwise stated here, as they become relevant to our review.

The District sought to build an addition to Jackson High School (the "Project"). As part of the bidding process, the District provided plans to Penzel, which in turn provided the plans to its subcontractor, Total Electric, Inc. ("Total Electric"), for the purpose of calculating a bid for the electrical work. Penzel entered into a contract with the District for the Project (the "Prime Contract"), which included separate but incorporated general conditions (the "General Conditions"). Additional facts about specific provisions of the Prime Contract and General Conditions relevant to this appeal will be stated in the discussion as needed. Penzel then entered into a contract with Total Electric to perform the electrical work at the bid price of $1,040,444 (the "Subcontract"). The District issued a notice to proceed to Penzel requiring substantial completion within 550 days, or approximately eighteen months. Total Electric did not substantially complete its work until approximately fifteen months after the deadline.

On April 1, 2010, Total Electric sent a letter (the "Letter") to Penzel regarding the status of the Project and owed compensation and requested that the Letter be forwarded to the District, which it was on April 6, 2010. Total Electric alleged the delays were due to defects and inadequacies of the plans provided by the District, as well as delayed responses and inadequate responses by the District. Total Electric sought an additional $1,407,388 in compensation, itemized as $873,268 in labor inefficiency costs, $278,500 in additional project management and supervision costs, $192,982 in uncompensated change order work, $30,000 in estimated electrical consultant costs, $17,294 in wage escalation costs, and $15,344 in current interest due, which the Letter noted was subject to adjustment. The costs for labor inefficiency and additional project management and supervision were further broken down into the total number of hours and hourly cost for each. Total Electric stated that:

It is recognized under the law that when plans and specifications are furnished to the bidding contractor and its subcontractors, there is an implied warranty that the plans and specifications are adequate, and that the intended result will occur when the contractor and its subcontractors follow the plans and specifications.

Total Electric indicated it was "willing to further discuss the dollar amounts claimed ... because of the inadequacy of the drawings and specifications," and "willing to meet with [the District's representatives] and the project design team involved in the electrical design to address Total Electric's claims and damages." The District determined that none of the claims in the Letter were valid and declined to meet with Total Electric.

Total Electric entered into a liquidating agreement with Penzel allowing Penzel to bring a claim against the District for the damages caused to Total Electric by the allegedly defective plans furnished by the District.² Subsequently, Penzel brought a breach-of-contract claim against the District on the grounds that the District had made an implied warranty that the plans it provided were adequate and complete, pursuant to the theory accepted in United States v. Spearin, 248 U.S. 132, 39 S.Ct. 59, 63 L.Ed. 166 (1918). Specifically, Penzel alleged the plans were defective and caused damages to Total Electric. Penzel additionally alleged Total Electric contacted the District about a number of problems that arose due to the defective plans and that the District's responses were often delayed and inadequate, exacerbating Total Electric's damages. Penzel sought recovery of both Total Electric's damages—equivalent to and identically itemized as in the Letter, except for interest due—and Penzel's own damages due to markup for...